AM Best has affirmed the credit ratings of Orion Reinsurance (Bermuda) Ltd, a Class 3 captive insurance company that was set up on the island in 2004.

The ratings agency affirmed the financial strength rating of B+ (Good) and the long-term issuer credit rating of “bbb-” (Good).

The outlook of these credit ratings is stable.

The ratings reflect Orion Re’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The agency said the ratings also reflected the company’s very strong risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio, and the expertise of its management team.

Partially offsetting these positive rating factors is the size of the company, which limits business diversification given the inherent concentration risk, and the sensitivity of the BCAR to changes in Orion Re’s balance sheet structure, and to the composition of the business portfolio.

Orion Re is licensed by the Bermuda Monetary Authority to act as a Class 3 insurer without restrictions of any kind in its class.

AM Best said the company’s main line of business was difference in conditions insurance, but the company also retained specific life and non-life insurance business.

Orion Re has experience and recognition in the public services industry, as well as strategic alliances to support recognised Latin American reinsurers.

As of December 2023, AM Best said, Mexico represented 44 per cent of the company’s gross written premium, with the rest distributed in 13 other countries, primarily throughout Latin America and the Caribbean.

The agency said: “Premium sufficiency was achieved in 2023, and Orion Re has maintained profitable bottom-line results during most years. Results are expected to improve as the business expansion plan takes place, supported by income from the rent-a-captive business, which has presented a consistent flow over the past years.

“As of June 2024, the company posted $121,795 in net income, and the loss ratio stood at 36 per cent, reflecting the management’s efforts to contain its claims.

“Orion Re’s risk-adjusted capitalisation, as measured by BCAR, has shown improvement since 2019, mainly due to a more conservative approach in the investment policies, which has reduced asset risk. However, due to the company’s size and operation, the scores are sensitive to changes in its balance sheet structure and the composition of Orion Re’s business portfolio.”